Welcome to Part III where we actually sell the house For Sale by Owner. I previously posted about instances in which you might rather use a conventional realtor as well as several unconventional options for selling your house and our own experience listing. Today I thought I would detail our experience first, then crystallize what I learned into a guide at the end.
(Don’t worry, I took down the baby picture before the showings.)
As you will recall, we listed the house on Thursday, and immediately my phone started ringing off the hook.
Over Friday and Saturday, I showed the house at least a dozen times. By the open house on Sunday, we already had two offers in hand and another on the way. Both were full price, with escalation clauses. An escalation clause is an automated bidding war that gives the ultimate price you’re willing to go up to and by what interval your bid will rise against other offers. Sounds like Ebay, right?
Keeping track of all the realtors that called was complicated, and I dialed at least 2 wrong numbers. I did not put a lockbox on the house because I wanted to treat each showing like an open house. I talked to each of the people who viewed the house and gave them my spiel about the property and the neighborhood.
On the advice of the internet and my beloved social science research, I did the following:
1. I tried to schedule the showings to overlap by 15 minutes so that people would know there was a lot of interest in the house.
2. As soon as we had an offer, I started telling everyone that there was already an offer on the property and that we would be reviewing all offers Sunday night in order to make a decision Monday. My hope was to start a bidding war.
3. I kept the cards of every realtor that showed the house and put them in a stack on a shelf in the dining room in plain view so that people would see this house was getting a lot of traffic. More than once I saw people leafing through them.
4. On Sunday right after the open house, I used those cards to send an email to each of the realtors who had been to the house thanking them for their interest and inviting them to make an offer tonight if they were interested.
The Open House went very well. Almost everyone who came in to the house gave incredible feedback on the condition of the house, and how clean everything was. Many people remarked they couldn’t believe three kids lived there. Mission accomplished. They also said how “tasteful” the design and finishes were, and complimented the “beautiful furnishings and staging”. Of course, this gratified my vanity immensely. People called it “perfect” and “turn-key”, and generally told us how in love they were.
Sunday night we had five offers to review. We chose the highest one and went to bed because The Stever, my flat fee realtor who handled everything on his cell phone from North Carolina, wasn’t available until Monday morning.
Monday we signed the highest offer and sent it to Steve to forward to theirs. At the last possible second as I was loading the kids into the car to pick up Fluffy from preschool, I got a call. It was a realtor who had called me as soon as the house was listed but then I hadn’t heard back from her until now. She said her clients were desperate to offer on the house and asked would we let them see it for a few minutes.
I told them we were under contract, apologized and hung up.
As soon as I hung up, I thought, “Let me call them back because I’m not sure Steve emailed that ratified contract yet”. I called her back and said, “Do you want to show the house, or do you want to buy it? Our contract is signed and ready to send, but I will call and tell my agent to hold it if you can beat an offer of $700k with no appraisal contingency.” [Kent and I had a discussion last night over whether to include numbers. Talking about figures is certainly indiscreet, but I contend that a) saying “we saved some money selling by owner” makes far less of an impact than the real figures, and b) give my your address and 30 seconds on the internet and I will tell you exactly what you paid for your house and when, so who cares?]
The realtor said they could beat the offer, and she would be able to tell immediately when they went in whether they were bidding since they had lost the bid on the two similar units that sold in our complex in the past two weeks.
With shaking hands, I called our realtor and asked if he’d sent over the contract. He thought I was trying to hurry him along and said, “I’m just about to send it right now, I just got distracted.” I told him “STOP THE PRESSES! Do NOT send that contract!” When I told him the situation, Steve’s response was, “Well we don’t want to lose this other offer because we keep them waiting too long. A bird in the hand….”
Here’s one of the main reasons I wanted to list FSBO. Basically, if that last-second call had come to Steve who got the same pay no matter what or to any other realtor who stood to make less than $600 from this possible sixth offer, the realtor would have told them, “Sorry, we’re under contract,” and hung up. I would have never even heard about that call. If I had been the realtor instead of the owner, I probably would have done the same. But because I was selling by owner and the call came directly to me who had $17,000 of skin in the game, I was willing to gamble. Realtors are far more willing to gamble, too, when it’s their own property on the line. As I’ve mentioned before, realtors keep their own properties on the market an average of 10 days longer than their clients’ properties and sell them for prices an average of 3% higher in the end. I don’t think realtors do this maliciously or carelessly. When they are working for a commission rather than selling their own home, their incentives are just stacked toward pushing through any reasonable sale.
But I digress.
I had fifteen minutes to get back to the house and stage it. I ran a red light flying home as fast as I could. I let the babies swelter in the car and stationed Fluffy at the living room window to watch for the realtor or anyone who approached the car while I staged it again as best I possibly could. When their realtor arrived, I was still rolling things into the garage and sweating like a beast in the humidity. But the house was gorgeous. About 10 minutes later, the husband of the couple showed up. The wife was seeing patients, so he was considering buying this house for her sight unseen. I tried to feed the babies who were whining for their lunch every edible morsel I could find in the car while we waited in the tot lot for half an hour.
After kicking the tires for an age, they came out and told me they’d give us $707k with no home inspection and no appraisal contingency. I checked their financing (which was complex enough to need clarification) and told them to write it up, asap.
I called Kent and did my best reality TV fake out. “I have some really bad news. That contract we signed? It looks like that’s not going to go through.” Aghast he asked, “What happened?!” ”Well I was driving to pick up Fluffy from preschool, and….” He couldn’t believe it. He kept asking, “Is this a joke? Are you kidding?” We had been slapping each other on the back chanting “$683,500″ all night and morning, and now it was up $23,500? This was too good to be true.
Then both Kent and I sweat bullets for hours waiting for the contract to be emailed over or for the realtor to call the whole thing off. We didn’t want to lose the other offer (which was currently at $683,500, but with an escalation clause–that’s an automated bidding war–up to $700k) by making them sweat too long. We squirmed like worms on a hook from the torture of not knowing. And then, boom, we had a contract at $707k with only the financing contingency, and proof that they had another $225,000 in assets to cover anything that might go wrong in the financing. We couldn’t sign fast enough.
And now for way too much information on our finances. For the mortgage on the next house we are building, we estimated we would sell the townhouse at $645k. We had paid $645k for it ourselves, and our zestimate was at $646k. We hoped for $660k which would cover the investment we put into it in our renovations. We listed at $674k because a couple of other interior units on our street had listed at $644k and $654k and sold within days in the past couple of weeks.
We got six offers, four of which were above asking.
So to make an incredibly long story (which could have been much longer, you’d have begged for death) somewhat shorter, we ended up selling the house for $62k more than we counted on, AND instead of paying a realtor $21,210 in commission, we paid a flat fee of $775. We still had to pay the buyer’s agent commission, but that’s almost unavoidable, and gets priced in to our calculus anyway.
When we were getting our prequalification for the loan on the next house, NO lenders would believe us that we were going to be able to sell by owner. And why should they? The standard story is that people try to sell by owner for a while, then end up hiring a realtor and dropping the price. My own sister tried to sell by owner for over a year before hiring a realtor. That was in the pit of the economic crisis though, and she truly doubts the realtor made any difference. Commonly, people try to sell by owner for just a few weeks before hiring a realtor because they are facing some kind of deadline and they think using a realtor will go faster. For our prequalification, all the lenders figured in a 3% seller’s agent commission. So now we were in the happy position of telling our lender we needed an adjustment to our prequalification that reflected the $83,000 more in assets we have now than we had thought we would just four days previously.
I say, “Thank you, television.”
So what about that other offer we signed and so nearly sent? When Steve sent the real estate agent of the people who lost their bid at $700k a little email with the bad news, she went ballistic. She called me and chewed me out for 20 minutes for not giving her a chance to beat the other offer. I’m not sure we would have taken a higher offer from them because at $710k they would have had to make the sale contingent on the sale of their other townhouse. We were also anxious to close so we could start bidding on tear down properties during the rest of the housing season. In any case, Steve said it is normal for there to be bitterness after bad news and for agents to swear they would have given you the moon AFTER they lose a deal on what was supposedly their best and final offer.
The worst part of selling the house myself was the couple of times when people asked me questions I didn’t know the answer to. It didn’t happen terribly often, but I definitely made some mistakes. For instance, one real estate agent asked me whether we would guarantee that we would make up the difference if the townhouse didn’t appraise for the contract price. Unfortunately, I couldn’t say, “Can you give me fifteen minutes on the internet to determine exactly what you mean and how I feel about it before I respond?” I hate it when my ignorance shows.
The best part of selling the house myself was the knowledge that no one else’s agenda or priorities stood between me and potential offers. The other best part was that I met a lot of great people. I found myself rooting for certain buyers and was touched by a personal letter one couple sent us. I wouldn’t be able to withstand the stress of selling my own house on a regular basis, but I sure did enjoy myself for a weekend.
Having been through the sale so recently, I put what I learned into a guide for anyone who wants to try Making the Sale.
Step One: Stage the House
Wait. Wasn’t staging the house already in Part II? Yes. But there are two kinds of staging. There’s staging for pictures where you push every unsavory thing just out of the frame, and then there’s staging for showings where you haul every unsavory thing down to the garage or all the way to public storage.
About 6 weeks before we listed, I started going to open houses on the weekends and checking out how people stage their houses. I kept taking my temperature about what made an impression on me and what didn’t. And of course, I fast forwarded through a lot of HGTV.
On Friday, the day after we listed, my sister Jenni took a day off from work to watch the babies while I scoured the house within an inch of its life. Seriously, there was no grout line unscrubbed, no window uncaulked, no baseboard unpainted. This place looked as close to new as it possibly could.
Here are some of the best techniques for making your house look even more spic-span-spectacular for showings:
- After sweeping and mopping, spray the floors with Pledge and polish them with a paper towel over the mop head or a swiffer sweeper. This makes them slippery and dangerous, so use caution.
- Remove rugs to show floors.
- Remove all garbage cans. Who wants to look at your trash?
- Store jewelry and electronics off-sight in case of theft.
- Dry all showers and clean shower doors with window spray.
- Clean and dry all sinks. A dried sink looks so much better than a wet one. Try it. You’ll like it.
- Polish everything with the appropriate product. Leather wipes on the couch, silver polish on the candlesticks, granite polish on the counter tops, etc.
- Stage your closets if you can, but at least Febreeze them.
- Walk around your house as though you were at an open house. Which cabinets would you open? Which drawers? Stage everything in those first.
- Remove all products from sight including shampoo in the shower, dish soap and scrubbing pads from the counter, even hand soap from the basins unless it’s full, new and nice looking. Remember, this is a model home that no one lives in.
- Go over the whole house with Mr. Clean Magic Erasers. They take off everything and are quicker than a new coat of paint.
- Use all white, bleached towels in every bathroom like a posh hotel. Fluff them in the dryer for 15 minutes before putting them up.
- Fluff the bathroom rugs in the dryer as well.
- Clear all knife blocks, utensils and small appliances off the countertops. People like to see counterspace.
- Change the toilet paper rolls to new ones and fold the end. Too much? There is no such thing as too much. First of all, a partially used roll of toilet paper makes the house look lived in. Second, I have had 5 different cleaning services clean this house, and I guarantee there is a psychological effect that makes the house seem cleaner when the toilet paper is folded like at a hotel.
- Put out treats. There is evidence that people tip higher if you give them a little mint with the check. I’m not aware of evidence that people bid higher on houses if you put out cookies. I wish I’d remembered to put out cookies, though. I like cookies.
Step Two: Make Your Materials
Generally, you will want to prepare handouts for the open house. You can spend a lot of money having these professionally done. I wasn’t into that. I did, however, print up sheets with a picture of the house, the essential information about the property including price, square footage, and year built, as well as a list of the improvements to the property and dates (new floors, new roof, new HVAC, new appliances, for example).
You will also need business cards to give out with your contact information so that realtors will contact you directly with questions or offers. I have my singing business cards, so I just used those. I felt weird about it, but my “mezzo-soprano” cards didn’t seem to negatively impact anything.
Step Three: Get Your Facts Straight
I memorized the fact sheet with the improvements so I could list those for people as needed. I tried to refresh my memory about the property as much as possible and anticipate possible questions so I would be prepared with answers. Most people asked the same questions.
Typical buyer questions:
How much are the HOA fees and what do those cover?
Can you put in a deck? I checked the HOA guidelines and asked a couple of neighbors how much their decks cost. When people asked this, I would show them two styles of decks you could see from our windows.
What is the parking situation in the complex?
How long does it take to walk to the metro?
How many square feet is it?
Typical realtor questions were:
What are you looking for in terms of settlement? (This means “what date would you like to close?” Five weeks is the standard around here.)
Have you received any other offers? Do you have any offers in hand?
How are you handling offers? We told people all offers needed to be in by Sunday night and that we were making decisions on Monday.
What can I do to write a winning offer? On the advice of The Stever (my realtor about whom you can read here), as soon as we had an offer in hand and the promise of another, I told people, “We are reviewing multiple offers and plan to take the offer most favorable to us. In this situation, I would encourage you to put in your best and final offer.” You could also say, “The fewer contingencies, the better”.
Do you have a preferred title company? We didn’t.
Listing the House and Making the Sale were definitely the hardest parts, but the story was far from over.
Stay tuned for Part IV: From Contract to Closing in which the rainbows and fluffy bunnies mold over and rot as the honeymoon phase between buyer and seller gives way to the customary adversarial dynamic.